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Obama’s Jobs Plan – 8% Unemployment and Re-election

As some of you know, I own a small business. I’ve been fortunate in good times and resourceful and imaginative in bad times.  As most small businesses, my business feels economic dips immediately and severely. Before I started my business, I estimated my potential profit based on sales, fixed cost, and variable cost. If I efficiently and effectively manage my business, I can achieve projected profit levels in good times and survive bad times.

I would love to hire 10 or 20 new employees, actually, I would love it if I had demand for my goods and services that forced me to hire 10 – 20 new employees. I’ll only hire new employees if I have orders (tasks, demand) for those new employees. Otherwise, I wouldn’t hire my Mother if she needed a job(easier to just give her money). If local, state, or federal governments decreases business variable cost (taxes, regulations, insurance requirements, etc), it would be wonderful. However, my hiring decisions will not change. I only hire new employees if I have orders (demand) for my products and services that require new employees.

As a business owner, personal tax cuts and business payroll tax cuts generally mean absolutely nothing. I’m saving every extra dollar (personal, business), and I’ll only hire if I have additional demand. If my business is profitable, efficient, and effective with less employees, I’ll reduce (fire, layoff) unnecessary labor. If I’m able to legally and responsibly reduce my labor cost by off-shoring, outsourcing, etc, I will. Regardless of my political opinions, as a business owner, I must compete  with other businesses or I will go out of business. The goal of my business is to earn as much profit with the lowest variable and fixed cost while minimizing my tax, regulatory, and insurance expenses.

While the goal of for profit businesses is to earn money, the economic  goals of government should be to create an environment that promotes US economic growth, full employment, and social equity. Of President Obama’s $447 billion jobs plan, there are $250 billion in small business and payroll tax cuts to be paid for “later” by entitlement cuts (social security, medicare, medicaid) long after he is re-elected and/or out of office. Thanks Mr. President, but with respect to my company, more tax cuts are completely worthless in creating jobs. Businesses (small and large) don’t hire people to create jobs, businesses hire people to do jobs. Nothing creates economic “certainty” and “confidence” like a full order book, robust sales, and low inventory.

Collectively, corporate America has more than $2 trillion dollars in retained earnings, but they behave just like my small business. Every time a idiot politician or journalist ask, “Why aren’t flush profitable corporations hiring?” Just remember, they aren’t hiring because they are meeting demand for their products and services at their current employment level for a profit. Again, only demand (orders) matters. Other than initial projections (profit, sales, and earnings), tax rates (personal, business, payroll) do not matter or encourage businesses to hire anyone.

Personally, I’m saving every dollar possible and/or paying off debts (business and personal). I watch Suze Orman, and she suggest people should reduce debts, live within their means, and save for retirement, rainy day, etc. Unfortunately, if every American followed Suze’s wise advice, US demand for most goods and services would take decades to return to pre-2007 levels. According to my staff economist via Conscience of a Liberal, Paul Krugman, only the federal government has the resources to spend and replace the demand lost since the 2008 depression recession. If elected/appointed officials choose not to stimulate the US economy by  monetary, fiscal, or trade measures, they are by default choosing high unemployment, slow growth, and economic pain for millions of Americans.  Economist forecast that if all of Obama’s jobs plan was enacted, unemployment would decease from 9.1% to 8%. They forecast Obama’s plan would create 1 million jobs but we have 14 million people out of work  and 5 to 10 million more people underemployed. Thanks for the “bold” plan Mr. President.

The goal of tax cuts is to put more money in American pockets but if they behave prudently (Suze Orman) or like me, tax cuts offer little Stimulus. Long term entitlement funding adjustments, cutting deficits, and borrowing to fund foreign wars in the middle of a depression recession is a mistake.  The Republicans are correct, the measures taken by Obama to date have not worked. The modest 2009 bipartisan Stimulus and business tax cuts have not bridged the economic gap caused by the 2008 depression recession. If this economic gap isn’t bridged by trade, fiscal, or monetary policies, it will take decades for America to recover, and America will lose two generations – those trying to start careers and lives and those trying to retire and live in dignity.

Bin Quick

Bin Quick